I was just scanning for xp_sendmail issues. One nasty one just cropped up on Production causing some rediculously complex SP's to fail.
I don't believe there is a way to trap the sendmail errors. I've seen some work-arounds that suggest running the mail call in a loop. I tried that but still got the error message and ruined the processing.
Barring anything else popping up in this forum, I going for the third-party solution. I don't want to be the first to install a MS Hotfix on my prod box... The KB article I was viewing on this subject is at http://support.microsoft.com/?kbid=833045.